Section 2: 30–40%2G

Payables and Accrued Liabilities

Exam insight

The current-versus-noncurrent line is where payables questions are won or lost. The most-tested trap is the refinancing exception: short-term debt can be reported as long-term only if the company both INTENDS to refinance and has the demonstrated ABILITY to do so (a signed agreement or actual refinancing before the statements are issued). Miss the ability half of that test and you misclassify the liability, which cascades into every liquidity ratio.

What AICPA wants you to know

1Classify liabilities as current vs. non-current using the one-year or operating cycle rule
2Apply the refinancing exception for short-term debt to be classified as long-term
3Record accrued liabilities for wages, interest, warranties, and bonuses
4Account for deferred revenue and when it converts to earned revenue
5Identify the current portion of long-term debt

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Classification CallWhere an item sits is a bright-line rules test: bucket it first, then compute anything.Probable and EstimableProbable and estimable means accrue, reasonably possible means disclose, remote means silence, and gains never accrue.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.